Every Monday I like to start the week with a look at ASIC’s short position report to find out which shares are being targeted by short sellers. A short seller borrows shares to sell on market with the aim of buying them back at a lower price in the future and pocketing the difference.
As it is a high-risk strategy with the potential for limitless losses, short sellers will often only take a short position if they believe they have a high probability of success. Because of this I think it is prudent for investors to keep a close eye on short interest levels.
According to data provided by ASIC, here are the 10 most shorted shares on the ASX this week:
- Syrah Resources Ltd (ASX: SYR) is once again the most shorted share on the Australian share market with short interest of 21.3%. Short sellers appear to be targeting Syrah due to the fears that its Balama project won’t command as high prices as expected for its graphite.
- JB Hi-Fi Limited (ASX: JBH) has seen its short interest rise week-on-week again to 16.8%. Short sellers have been increasing their positions after the retailer downgraded its full-year profit guidance due to a weak performance from its Good Guys business.
- Domino’s Pizza Enterprises Ltd. (ASX: DMP) has seen its short interest fall significantly week-on-week to 16.3%. Sentiment appears to have improved since its US parent reported a strong quarterly result.
- Galaxy Resources Limited (ASX: GXY) has 14.7% of its shares held short, down week-on-week. News that the lithium miner is looking into strategic options for its Sal de Vida operation has gone down well with the market.
- Nanosonics Ltd (ASX: NAN) has seen its short interest rise again to 13.1%. Short interest continues to rise despite news that the infection control specialist’s trophon2 device has been granted FDA clearance.
- Vocus Group Ltd (ASX: VOC) has seen short interest fall slightly to 12.2%. The telco company has been a hugely disappointing performer over the last two years and short sellers don’t appear to expect that to change any time soon.
- Myer Holdings Ltd (ASX: MYR) has seen its short interest rise to 11.7%. Short interest has risen despite news that three directors bought shares on-market following the appointment of a new CEO.
- Orocobre Limited (ASX: ORE) has seen short interest rise to 11.5%. Unfavourable weather conditions in Argentina recently led to a surprise production downgrade by the lithium miner.
- Retail Food Group Limited (ASX: RFG) has 11.4% of its shares held short. Despite the embattled food and beverage company’s shares trading within sight of a multi-year low, some short sellers appear to believe they can go lower.
- Australian Agricultural Company Ltd (ASX: AAC) has entered the top ten with short interest of 11.2%. The cattle producer recently released a market update which revealed operating EBITDA guidance of $12 million to $16 million in FY 2018. This compares with FY 2017 operating EBITDA of $45 million.
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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited and Vocus Communications Limited. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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